Wall Street started out slow on Monday and shifted into fifth gear as expectations of another Fed Cut became more of a reality. The up-turn occurred only minutes after the report on home sales came out during early morning trading. Purchases of new homes plummeted to a one year low in December and new home prices took a 10% dip from a year earlier.
This turns out to be the largest 12 month price decline since 1970. This news raised expectations that the Federal Reserve will cut interest rates yet again on Wednesday and the prospect of lower interest rates lifted financial and homebuilder stocks.
Just a few weeks ago, Morgan Stanley analysts came out with a report predicting that housing prices wouldn’t see a bottom until late 2010 (Click Here To Read Report). With each and every housing statistic in the gutter, this is becoming more of a reality each and every day.
Analysts are expecting the Fed to shave another half a point off the already low 3.5%. Will this help the housing market? Well since there isn’t a bank in the Western Hemisphere that will provide a mortgage to anyone with a credit score below 700 - I would have to say no – even with fixed mortgage rates on their way down and the “balloon” rate spike freeze going into effect.